Complete Estate Plans for Michigan Residents 1 Methods of Estate Distribution Complete2-3 Types of Complete Estate Plans

4 Estate Planning for Long Term Care Estate5 Elements of a Complete Estate Plan

PlansComplete Estate Plans for Michigan Residents This booklet describes how assets are distributed from an estate, and it outlines several types of Complete Estate Plans that can be used to achieve almost any estate planning objective. Each Complete Estate Plan consists of documents and services to prepare for incapacity, and to distribute assets to desired beneficiaries. These estate plans are appropriate for all Michigan residents.

Preserving funds to pay for long term care (LTC) in a nursing home is also a common estate planning objective. This booklet contains a brief discussion regarding how to pay for long term care services, and some planning strategies to qualify for Medicaid benefits. Paying for LTC is a complex topic. We would be glad to consult with you in more detail about your options.

Estate Planning Law Group is focused on the practice areas of estate planning, elder law, business planning, and estate administration. Please visit www.MichiganEstatePlan.com for more information.

This publication is not a substitute for legal advice. Please do not proceed with any estate planning strategy outlined in this booklet without consulting a qualified attorney.

Assets may only be distributed from a deceased person’s estate by one of three methods: probate, beneficiary designation, or trust. Every estate plan must utilize one or more of these methods. This Complete chart describes how each type of asset is distributed from an estate, and who will receive it.

Estate ESTATE Plans

Assets without a Assets with a Assets Designated Beneficiary Designated Beneficiary Transferred to a Trust (or joint owner) in the in the Document of in the Document of Document of Ownership Ownership Ownership

Probate Administration No Management Trust Administration by Personal Representative Individual Claim for Each by Trustee Asset or Account

Beneficiaries Named in Beneficiaries Named in Beneficiaries Named in Last Will & Testament Asset or Account Trust or by State Law

1 Types of Complete Estate Plans

We offer several types of Complete Estate Plans to fit every situation and budget. Each plan is designed to achieve specific goals by using the methods of distribution described in the previous section. The diagrams below describe how each plan works.

1 | Simple Last Will A simple will plan is the lowest cost method to provide detailed instructions for distribution of an estate. Assets without a designated beneficiary will be distributed through the probate process to beneficiaries named in the last will. However, assets with a designated beneficiary in the document of ownership will be distributed to the beneficiaries named in those documents.

Assets without a Probate Beneficiaries ESTATE Designated Beneficiary Administration of Last Will

2 | Last Will with Trusts For Under-Aged Children Plan 2 is designed to protect property for under-aged children at a lower cost than using a revocable trust. Two trusts are used to manage the estate for the children. General assets are transferred by a last will (using probate) to a “testamentary trust”, while retirement accounts (IRA, 401(k) etc.) are transferred directly to a “retirement trust” for each child. The retirement trust simplifies management for the trustee and enhances income tax deferral for the beneficiaries. Each trust is managed by a trustee until the children reach a specified age.

Assets without Probate Management of Beneficiaries of a Beneficiary Administration Testmentary Trust Testmentary Trust ESTATE

Accounts Transferred to Trust Management of Beneficiaries of Retirement Trust Administration Retirement Trust Retirement Trust

3 | Probate Avoidance (No Trust) The objective of a probate avoidance plan is simple: to avoid probate without using a trust. This type of plan is suitable for anyone with a small number of beneficiaries who do not need management by a trustee. Each asset is arranged to avoid probate and then distributed to designated beneficiaries.

Assets with a Individual Claim by Beneficiaries Named ESTATE Designated Beneficiary Each Beneficiary In Each Asset

4 | Simple Revocable Trust Plan 4 is used when the objectives are to avoid probate and to appoint a trustee to manage the process of distributing assets. A revocable trust also allows complete flexibility to designate beneficiaries. Assets are transferred to the revocable trust and then distributed by the trustee.

Assets Transferred Beneficiaries of Trust Administration ESTATE to Revocable Trust Revocable Trust

2 5 | Revocable Trust with Retirement Trust for Under-Aged Children The objectives of Plan 5 are to provide care and support for under-aged children, and to avoid probate. Two trusts are used to manage the estate – one revocable trust for general assets, and a second “retirement trust” for retirement accounts (IRA, 401(k) etc.). The retirement trust simplifies management for the trustee and enhances income tax deferral for the beneficiaries. Both trusts direct the trustee to manage the estate for the care and support of under-aged children until they reach a specified age.

Assets Transferred to Trust for Under-Aged Beneficiaries of Trust Administration Revocable Trust Beneficiaries Revocable Trust ESTATE

Accounts Transferred to Trust for Under-Aged Beneficiaries of Trust Administration Retirement Trust Beneficiaries Retirement Trust

6 | Revocable Trust with Special-Purpose Trust Plan 6 combines a revocable trust with a special-purpose trust when necessary to achieve certain objectives. For example, a special-purpose trust may be added to care for pets, maintain a vacation property, establish a controlled gifting plan, or support a disabled family member. Many types of trusts may be added to achieve specific goals.

Assets Transferred Trust Beneficiaries to Revocable Trust Administration of Revocable Trust ESTATE

Assets Transferred to Trust Beneficiaries of Special Purpose Trust Administration Special Purpose Trust

7 | Revocable Trust with Irrevocable Trust for Medicaid Qualification (Nursing Home Care) Plan 7 is designed to protect assets from state Medicaid cost recovery, and to expedite qualification for Medicaid benefits to pay for nursing home care. This plan includes a revocable trust to avoid probate, along with an irrevocable asset protection trust to accelerate Medicaid eligibility. Refer to the next page for more information about estate planning for long term care.

Assets Transferred to Trust Beneficiaries of Revocable Trust Administration Revocable Trust ESTATE

Assets Transferred to Trust Beneficiaries of Irrevocable Trust Administration Irrevocable Trust

3 Estate Planning for Long Term Care (LTC)

A common objective of estate planning is to ensure that sufficient funds are available to pay for long term care (LTC) in a nursing home setting. According to the U.S. Department of Health and Human Services, a person turning 65 today has almost a 70% chance that they will need some type of long term care services during their remaining lifetime. About 20% of those individuals will need LTC for more than 5 years1.

We do not sell or recommend financial products to pay for long term care, but we would be glad to refer you to a qualified financial advisor. There are several ways to pay for LTC:

Funding Options for LTC

Private Funding Options Government Funding Options • Annuities (immediate or deferred) • Veterans Administration (limited monthly benefit) • Cash • Medicare (120 days maximum) • Debt (reverse or conventional mortgage) • Medicaid (income, asset and physical eligibility required) • Charitable remainder trust • Life insurance ⋅⋅ Cash value ⋅⋅ Combination LTC and life ______Average Monthly Cost of LTC ⋅⋅ Accelerated death benefits x ______Average Length of LTC ⋅⋅ Life settlement ⋅⋅ Viatical settlement = ______Estimated Cost of LTC • Long term care insurance

Asset Eligibility for Medicaid Benefits Medicaid is available to pay for nursing home care for eligible individuals. Qualifying for Medicaid benefits can be as simple as filing an application, or it may involve a complex combination of strategies to accelerate eligibility. Income, asset and physical eligibility must be considered before the application is filed. Planning options to enhance asset eligibility depend on when the benefits will be needed. Advance planning may occur well before the need for benefits arise. Regardless of the timing, many options must be reviewed and discussed during the planning process.

Advance Planning Options Immediate Qualification Options • Avoid probate cost recovery • Avoid probate cost recovery • Pre-paid funeral contract • Pre-paid funeral contract • Irrevocable gift trust • Pay off debt • Maximize community spousal allowance • Annuitize assets to income stream • Irrevocable gift trust • Divestment of funds • Caregiver contracts • Home improvements • Vehicle repair or replacement

1 www.longtermcare.gov

4 Elements of a Complete Estate Plan

DOCUMENTS PLAN 1 PLAN 2 PLAN 3 PLAN 4 PLAN 5 PLAN 6 PLAN 7 AND SERVICES Consultation ✓ ✓ ✓ ✓ ✓ ✓ ✓

Document Binder ✓ ✓ ✓ ✓ ✓ ✓ ✓

Flash Drive ✓ ✓ ✓ ✓ ✓ ✓ ✓

Estate Planning Roadmap ✓ ✓ ✓ ✓ ✓ ✓ ✓

Power of Attorney ✓ ✓ ✓ ✓ ✓ ✓ ✓

Health Care Directive ✓ ✓ ✓ ✓ ✓ ✓ ✓ Appointment of Funeral Representative ✓ ✓ ✓ ✓ ✓ ✓ ✓ Appointment of Guardian ✓ ✓

Simple Last Will ✓ ✓ ✓ ✓ ✓ ✓ Last Will with Trust for Under-Aged Children ✓ Simple Revocable Trust ✓ ✓ ✓ Revocable Trust for Under-Aged Children ✓ Retirement Account Trust ✓ ✓ Special-Purpose Trust ✓ Irrevocable Asset Protection Trust ✓ Medicaid Planning Analysis ✓ Personal Property Assignment ✓ ✓ ✓ ✓ ✓ Warranty Deed ✓ ✓ ✓ ✓ ✓ TOD Business Registration ✓ ✓ ✓ ✓ Guide to Avoid Probate ✓ Certificate of Trust ✓ ✓ ✓ ✓ ✓

Trust Funding Instructions ✓ ✓ ✓ ✓ ✓ Trust Administration Documents ✓ ✓ ✓ ✓ ✓

5 www.michiganestateplan.com (866) 230-4200